Les Echos: “François Villeroy de Galhau: The Banque de France has been the greatest mission of my life”

What are your reasons for leaving the Banque de France a year before the end of your mandate?
I’d been thinking for a long time that after the Banque de France, I would like to take on a role in the social field. Jean-Marc Sauvé [President of the Apprentis d'Auteuil foundation since May 2018, editor's note] approached me last autumn about who would succeed him when he stepped down at the end of May 2026. And so, after a great deal of thought, I decided to leave my position as Governor of the Banque de France at the beginning of June. The presidency of the Apprentis d'Auteuil foundation is a voluntary position, but it is a genuine public interest role with a major actor in child welfare. I have been in public service for most of my life and this gives me an opportunity to continue that commitment.
In terms of timing, I will have accomplished the bulk of my mission at the Banque of France by June. We will have wrapped up our strategic plan, the G7 meeting will be behind us, and we will have published the letter to the President of the French Republic.

Your successor will therefore be appointed before the 2027 presidential election. To what extent did the Rassemblement national’s rise in the polls influence your decision?
No one asked me to do anything of the sort. All those who know me as a free man, know me to be independent, and know that if I had been asked, I would have refused. This is a personal decision. I answered a call, in every sense of the term.

How would you assess your nearly 11 years at the head of the Banque de France?
This not just my record; it is a collective one, achieved over a period of years that have not all been easy. Collectively, we have transformed the image of the Banque de France. It was extremely respectable but was sometimes regarded as a bit of an old lady. Now, it is more in the public eye and more effective. We have cut our costs by nearly 4% per year in constant euro by natural attrition, which required a demanding reorganisation, particularly of the branch network. We have been recognised by international NGOs – three times in a row – as the greenest central bank in the G20.
We have enhanced our presence among our users, both individuals and businesses, especially during the Covid crisis. And the Banque de France has been a pioneer in innovation within the Eurosystem, particularly with regard to the Central Bank Digital Currency and now in artificial intelligence. Another source of satisfaction to me is to have stepped up gender parity in the Banque de France’s Executive Committee. When I arrived, of the thirteen members on the Governing Board, two were women. Today there are six.

And what vision of monetary policy did you bring to the Governing Council of the European Central Bank?
From the very beginning, I made it known that I was a pragmatist and that I rejected the ornithological labelling of “dove” or “hawk”. I experienced two very different periods under the presidencies of Mario Draghi and Christine Lagarde, which corresponded to very contrasting economic situations. I supported unconventional monetary policy, while drawing attention to issues of financial stability. I did not support the resumption of the asset purchase programmes in September 2019. That is the freedom of a pragmatist.
Then, with Christine Lagarde, we had to deal with a very different situation from the end of 2021 onwards, with this wave of inflation that no one had seen coming. I believe we managed it rather well; we raised rates quickly and as a result we avoided having to raise them too high. And today, the battle against inflation has been won, and our rates are at 2%, the lowest level among major advanced economies outside Japan.

What lessons can we learn from the large-scale deployment of unconventional policies? Some people have connected it to the period of high inflation that followed.
Unconventional policies were not responsible for the subsequent wave of inflation. We had two shocks to deal with: a disinflationary, even deflationary, shock with Covid, followed by an inflationary shock with Russia's invasion of Ukraine. Both were extremely improbable, and the fact that they occurred one after the other even more so. The ECB reacted as quickly and pragmatically as possible. It is important to remember that in 2020, faced with Covid, some people felt that the ECB was not doing enough. And at the beginning of 2022, there were other people who felt that interest rates should not be raised.
Today, we are in a good position from a monetary perspective. But a good position is neither comfortable, given the uncertainties and difficulties our fellow citizens are experiencing, nor static. Downside risks to price developments now seem, to me, to slightly outweigh the upside risks. I therefore stand more than ever for an agile pragmatism when it comes to interest rates.

Do you think that the independence of central banks is more under threat today than it was in the past?
Not in Europe. First, because we are protected by an extremely robust treaty. And second, because I do not see central bank independence being challenged in any of the major countries, including our own. The Banque de France, the ECB and the Eurosystem have gained in legitimacy. In a world of tremendous volatility, uncertainty and blur, having an independent central bank that is known to bring its expertise to bear over the long term is rather a source of confidence appreciated by our fellow citizens.
Remember: in 2022, a great many observers doubted that we would be able to bring inflation down without falling into recession. But we did it. I am not saying that it was solely thanks to monetary policy, but let us remember General Joffre after the victory at the Marne: "I don't know who won the Battle of the Marne, but if it had been lost, I know who would have lost it.”

And what about the rise of populism in Europe?
The central bank is independent from political parties. What I do want to point out, however, is that the euro’s journey began, at the time of the Maastricht referendum, with the limited backing of 51% in France. For several years now, the euro has enjoyed cross-party consensus and is supported by 76% of French people. At a time when everyone is saying, “Europe is disembodied, is unpopular”, this is an example of a long-term European success story. When a European project is embodied, explained and implemented over time, it works.
Citizens have fully understood that the independence of the central bank is in their interest. It helps to achieve both lower inflation and lower interest rates, which are more favourable to economic activity.

France is one of the countries in the euro area with the weakest growth. How do you explain this?
Insufficient growth is first a European problem. Potential growth, which is to say the “cruising speed” of the European economy, was at 2% per year at the beginning of the century. Today, it is barely more than 1% per year. This can be explained by demographics, but also by structural problems –productivity lag, innovation, and so on – such as those highlighted in the Draghi and Letta reports.
France is no exception, but also has a specific problem of public finances. No one can seriously claim any more that increased deficits and public spending would boost French growth. The very opposite is true today: the loss of control over public debt is creating uncertainty, which is leading to high household savings levels and a wait-and-see attitude among businesses.

What will be the major tasks facing your successor?
That will obviously be up to him or her to decide! But the main challenge facing central banks is to ensure both stability and innovation. That may seem like an oxymoron: our mandate is to ensure price stability and financial stability. And in this highly uncertain world, it is even more valuable. But at the same time, we must be resolutely innovative, in the field of artificial intelligence, obviously, but also in the field of payments. We need a central bank digital currency, both for the general public (the digital euro) and for interbank transactions.
Imagine if tomorrow there was a monetary landscape without the anchor of a public currency: it would be extremely dangerous. But it must be coordinated with private innovation: euro-based stablecoins or euro-denominated tokenised bank deposits, plus European payment solutions such as Wero. Money has always been a public-private partnership: this was true in the days of metal coinage, as it was with paper banknotes, and now with digital currency. If we want to guarantee European payments sovereignty, we need to build up both these layers.

And any advice that you might give your successor?
First, I would tell him or her that the Banque de France has been the greatest mission of my life, combining strategy and management. At our modest scale, we have been a model of public transformation. Second, I am convinced that independence – with the expertise and credibility that go with it – and European commitment are the two pillars of wisdom of a good central banker.